Sunday, September 25, 2005
I think Wall Street is strange
When Google went public is was in SF and the hype was not to high - it took them WallStreet guys 4 months to get it. And now with Ebay becomming the worlds biggest and most global VOIP Telco (with ALL THE ENDLESS problems it will give to ORDENARY TELCOS - who live from artificially high international roaming) - I still wait for the value to get into the WallStreet dudes heads.
When Google went public is was in SF and the hype was not to high - it took them WallStreet guys 4 months to get it. And now with Ebay becomming the worlds biggest and most global VOIP Telco (with ALL THE ENDLESS problems it will give to ORDENARY TELCOS - who live from artificially high international roaming) - I still wait for the value to get into the WallStreet dudes heads.
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My friend, you are operating from the assumption that the public markets are rational and that they make sense, and that shareprice fluctations are rationally motivated.
This is, not necessarily, true.
This is, not necessarily, true.
# posted by 
: 1:59 PM, September 26, 2005
: 1:59 PM, September 26, 2005
I think that what you see as an asset may well be a liability. eBay is a service retailer. It makes its money from selling advertising space. To date, people have bought eBay shares because of the value they saw in e-retailing. Now, if what you're saying is correct, they need to see eBay as an e retailer and the biggest VOIP company in the world. Those are two pretty diverse markets. The risks in the VOIP market are completely different to the r-tailing market and the problem eBay faces now is one of identity. Investors will, I think, inevitably discount the value of Skype to nothing.
I think there are two points here. First, you assume that there is value in Skype's VOIP business. Investors need to be convinced. Secondly, if you can convince invetors that there is latent value, you need to convince them that eBay knows how to realise that value.
On the first point, Skype has lots of competitors now including some major players like google and microsoft. Convincing investors that Skype isn't going to get killed just like Netscape did is not a cakewalk.
On the second point, the eBay share price to date reflects people's belief that eBay knows what they're doing when it comes to Internet auctions. For the stock price to go up, investors need to be convinced that eBay knows what they're doing when it comes to VOIP? If Skype had been bought by a telecommunications company that had experience in the industry and that could throw its weight around with its contacts in the industry to beat off the competitors and face the regulation issues, then I'd be buying shares. In that case, there'd be a clear synergy and likelihood that eBay would unlock Skype's potential and grow the value of the company. However, I don't see that eBay brings any relevant experience or influence to the table. eBay knows nothing about running a telecommunications company. Skype barely know anything about this business themselves. I don't see how this deal means that the value of Skype will increase thereby raising the value of eBay. Potential is great, but I don't see that eBay can unlock it.
They will be succesful, I believe, in turning the Skype presence on their website (through Skype me buttons) into money but I don't believe that this feature will add $3Bn of value to eBay.
For the moment, as a potential investor, I look at eBay as an e-tailer alone, not a telecommunications company. I think that's the safe view and I think a lot will have to change before investors will start to see Skype as a reason to buy rather than sell eBay assets.
I think there are two points here. First, you assume that there is value in Skype's VOIP business. Investors need to be convinced. Secondly, if you can convince invetors that there is latent value, you need to convince them that eBay knows how to realise that value.
On the first point, Skype has lots of competitors now including some major players like google and microsoft. Convincing investors that Skype isn't going to get killed just like Netscape did is not a cakewalk.
On the second point, the eBay share price to date reflects people's belief that eBay knows what they're doing when it comes to Internet auctions. For the stock price to go up, investors need to be convinced that eBay knows what they're doing when it comes to VOIP? If Skype had been bought by a telecommunications company that had experience in the industry and that could throw its weight around with its contacts in the industry to beat off the competitors and face the regulation issues, then I'd be buying shares. In that case, there'd be a clear synergy and likelihood that eBay would unlock Skype's potential and grow the value of the company. However, I don't see that eBay brings any relevant experience or influence to the table. eBay knows nothing about running a telecommunications company. Skype barely know anything about this business themselves. I don't see how this deal means that the value of Skype will increase thereby raising the value of eBay. Potential is great, but I don't see that eBay can unlock it.
They will be succesful, I believe, in turning the Skype presence on their website (through Skype me buttons) into money but I don't believe that this feature will add $3Bn of value to eBay.
For the moment, as a potential investor, I look at eBay as an e-tailer alone, not a telecommunications company. I think that's the safe view and I think a lot will have to change before investors will start to see Skype as a reason to buy rather than sell eBay assets.
# posted by : 4:56 PM, September 28, 2005
: 4:56 PM, September 28, 2005
Well i think i get your standpoint - but you do forget how much of the Ebay business today that is PayPal revenue - and that was also a strange aquisition... Now Ebay made a dream move - on going into a NEW BUSINESS AREA AGAIN - to becomme market leader - hopefully ;)... Due to my deep believe in VOIP and specially Skype I migth be blind but - its a KILLER constilation - I really think.
Im so happy to get REAL & LONG COMMENTS - and I cant even say sorry enough for being so late on answering...
Im so happy to get REAL & LONG COMMENTS - and I cant even say sorry enough for being so late on answering...
The Paypal example is a valid point although the synergies between Paypal and eBay were a bit more obvious. Even before the acquisition, Paypal was the most popular settlement option on eBay. eBay would have had a good idea of how much traffic Paypal was getting and how much they might get out of a deal. Also, Paypal cost eBay about 3 times less than Skype.
Paypal hasn't done quite as well as eBay hoped it might. Notably, its business outside of eBay settlements hasn't lived up to expectations. It's still predominantly an eBay-dependent business. That's the concern, I think, for eBay investors with Skype. That Skype might become just a mechanism for settlement of eBay transactions. As some have commented, one wonders what eBay gained out of this deal that they couldn't have got from a licence deal with Skype.
I share your confidence in Skype and SkypeOut and other services offered by Skype should at least allow the unit to break even in the short term. But I'm not sure I understand why Skype went with eBay and vice versa and as a potential investor, that makes me want to keep the money in my pocket for a while to see how things turn out. There would have been the option for Skype to list which would have made Skype a dedicated VOIP company - a clearly defined business. Alternatively, my understanding is that a number of telecommunications companies had, over time, expressed an interest in Skype. The option of Skype being acquired by a telecoms company would have given Skype some leverage in the industry and the telecoms company a jump start in what is obviously the next wave of telecommunications. For me, both of those options were favourable to Skype being acquired by a retail company that knows nothing about telecommunications and that has untested theories about what Skype may be able to add to its bottom line.
That said, people like you and Tim Draper et al are a lot better qualified than anyone else to judge which option would realise the most cash for the investors in Skype is and if the valuations we see in the papers are true, everyone did rather well. All that remains is to convince prospective eBay investors that Skype will blossom within eBay.
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Paypal hasn't done quite as well as eBay hoped it might. Notably, its business outside of eBay settlements hasn't lived up to expectations. It's still predominantly an eBay-dependent business. That's the concern, I think, for eBay investors with Skype. That Skype might become just a mechanism for settlement of eBay transactions. As some have commented, one wonders what eBay gained out of this deal that they couldn't have got from a licence deal with Skype.
I share your confidence in Skype and SkypeOut and other services offered by Skype should at least allow the unit to break even in the short term. But I'm not sure I understand why Skype went with eBay and vice versa and as a potential investor, that makes me want to keep the money in my pocket for a while to see how things turn out. There would have been the option for Skype to list which would have made Skype a dedicated VOIP company - a clearly defined business. Alternatively, my understanding is that a number of telecommunications companies had, over time, expressed an interest in Skype. The option of Skype being acquired by a telecoms company would have given Skype some leverage in the industry and the telecoms company a jump start in what is obviously the next wave of telecommunications. For me, both of those options were favourable to Skype being acquired by a retail company that knows nothing about telecommunications and that has untested theories about what Skype may be able to add to its bottom line.
That said, people like you and Tim Draper et al are a lot better qualified than anyone else to judge which option would realise the most cash for the investors in Skype is and if the valuations we see in the papers are true, everyone did rather well. All that remains is to convince prospective eBay investors that Skype will blossom within eBay.
# posted by : 11:05 AM, October 03, 2005
: 11:05 AM, October 03, 2005<< Home
